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For years we have been taught that debt is bad, and that it feels bad to sit on a big mountain of debt. Therefore most of us feel uncomfortable when it comes to debt. It is in our nature that we want to eliminate any risk, so we try to pay off our debt as quickly as possible. To do this, We often tend to invest in equity capital and arrange for a high monthly installment, so that our debt is eliminated as soon as possible.
The only problem is that there is good and bad debt. Bad debt makes you poorer. Good debt, on the other hand, can make you richer! How does that work? Bad debt means debt for consumption purposes; loans we take out for material things we can’t afford: the expensive car, the luxury holiday, the new washing machine, etc. Good debt is different. The lower your equity investment, the higher the return on equity. In addition, you will be able to buy more things with the same equity. Instead of raising $100,000 in equity for a single investment, why not split it up into five times $20,000 for five different investments? However, always remember: the monthly cash flow must remain positive. As long as this condition is met, it only makes sense to further increase the use of borrowed capital.